In the news this week

Author: Amélie Labbé, John Crabb, Karry Lai | Published: 10 Aug 2018

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Americas: for
the record

It has been a good week for the US economy, which broke with
the news that a good number of its largest companies are
recording excellent profits unlike those seen since prior to
2008, citing tax boosts as a major contributing factor. This
was followed by a record-breaking $26 billion 10-year Treasury
bond issuance, indicative of investor appetite.

Enthusiasm was also strong for Tesla and Elon Musk, who
announced intentions to take the electric car company private,
at a price of $420 per share. Stock price increased following
Musk’s Tweet, which was followed by an apparent
desire for existing shareholders to remain, despite warnings
that the Securities and Exchange Commission may reprimand the
decision as a result of the method of communication.

Elsewhere, President Trump announced a fresh, and strong,
round of economic sanctions on Iran. This comes three months
after the US withdrew from the Joint Comprehensive Plan of
Action, and has been called a breach of international law by
certain sources. China, which has chosen to ignore this threat,
suggests it will carry on trading with Iran, and has also taken
steps to reduce sanctions imposed on North Korea and increase
tariffs on US goods.

In Colombia, new President Ivan Duque was sworn into office
following his 54% victory over rival Gustavo Petro. Duque has
promised to turn the country’s economy around, and
his policies are likely to see an increase in foreign direct
investment as the country looks to rebuild.

Asia Pacific:
setting the record straight

China’s Ministry of Commerce is consulting on
its draft rules to ease restrictions on foreign investors in
China’s A-share market. The A-shares investment
rules apply to those made through agreements, the issuance of
new shares and tender offers. The proposed changes stipulate
that a foreign investor must hold assets above $50 million or
have $300 million in assets under management, which is a
reduction from the $100 million and $500 million required
previously. Additionally, the lock-up period is proposed to be
reduced to 12 months from the present 36 months. The
consultation period ends on August 29.

China Tower, the world’s largest telecom tower
operator, began trading its shares on the Hong Kong Stock
Exchange on Wednesday at HK$1.26 ($0.14 approximately) per
share, the lower end of its proposed range, to raise $6.9
billion. This is the world’s largest initial
public offering in two years, ever since Postal Savings Bank of
China’s $7.6 billion own deal in 2016.

The Hong Kong Exchange has published its consultation
conclusions on the Corporate Governance Code and guidance for
boards and directors. New measures that will come into effect
January 1 2019 aim to strengthen the transparency and
accountability of the board and election of directors,
including independent non-executive directors (INEDs); improve
the transparency of INEDs’ relationship with
issuers, promote board diversity, and require greater dividend
policy transparency.

EMEA: like a broken
record

It may be the summer, a period associated with a lull in
activity, but the financial markets don’t seem to
have got the message.

Brexit discussions and agreements – or a lack of
– continue dominating the headlines, as a number
of banks announced this week they were moving staff or setting
up new headquarters outside of the UK. Bank of America is
reportedly moving some staff including research analysts to
Paris, while HSBC said it was relocating seven offices to the
French capital, a move which would help it run its EU-focused
businesses out of Europe. While the UK and the EU agree on
roughly 80% of the shape of the future relationship, a
financial services consensus remains elusive.

One area the UK is seeing some success in is fintech, with
the Financial Conduct Authority announcing plans for a 'global
version of its domestic regulatory sandbox’. The
regulator has joined forces with 11 of its counterparts
including the Dubai Financial Services Authority, the Guernsey
Financial Services Commission, the Monetary Authority of
Singapore and the Central Bank of Bahrain.

The Turkish lira has fallen 12% against the US dollar,
prompting concerns that some EU lenders are over-exposed to the
fragile currency, including in Spain, Italy and France. The
fall comes ahead of President Erdogan announcing a new economic
model amid growing economic and monetary instability.

Abu Dhabi Islamic Bank has reportedly appointed a roster of
banks to arrange the sale of a $750 million perpetual tier 1
sukuk. The announcement comes after months of subdued
activity in the Islamic finance market.